Águas de Portugal borrows money to pay off council water debts

Águas de Portugal already owes the European Investment Bank €1,450 million but has managed to secure another loan of €420 million, nearly half of which will be used to cover the debts of councils which owe money to their source water supplier.

In a move guaranteed to make Portugal’s councils even less likely to pay for their water supplies, while continuing to charge impotent householders often mind-boggling mark-ups, the European Investment Bank will lend money to the Portuguese water group to develop and fix up the country’s leaking water supply system and to build larger waste water treatment plants while council debts will be centralised under a mysterious ‘funding instrument.’

The loan is in two parts with the first tranche already on its way and the second scheduled to come through after agreements have been made between Águas de Portugal and local councils over the huge sums some councils owe their water supplier.

The loan is being made under the Investment Plan for Europe, aka the Juncker Plan and according to the president of the water company, João Nuno Mendes, it will serve to “fund the fundamental investments” of the group, as part of a larger €880 million plan.

The first instalment is for €220 million and the remaining €200 million will fund a ‘financing instrument’ for municipalities, in a form yet to be divulged.

According to João Nuno Mendes, this second tranche could solve the “historical problem of municipal debts” to water supply companies.

In practice, the European Investment bank will take on the water debts of Portugal’s slow-paying and non-paying councils in a process that will have to be negotiated “case by case” and is expected to be launched during the next year, explained Mendes.

Environment Minister, João Pedro Matos Fernandes, voiced the opinions of many during the signing ceremony by stating that it is inexcusable that council’s have to be let off the hook in this way.

One of the reasons given for borrowing such massive amounts of money is “to make the network stronger to cope with drought situations.” This is water company speak for ‘fix the water leakage’ that blights many local systems relying on old and damaged pipes.

There is the expected stab at guessing the number of jobs the new loan will provide for – 7,400 was suggested for the number of people using shovels and spanners to strengthen existing supply networks and build sewage treatment plants.

This waste water system provision needs urgent upgrading too, especially in tourist hot spots such as the Algarve where projects already covered by the investment plan include the new plant between Faro and Olhão and the one at Companheira near Portimão.

The EIB’s current funding of Águas de Portugal stands at €1,450 million but the 25-year loan signed today is the first one granted by the European Investment Bank to the water company that does have a taxpayer-backed guarantee.